The Hindu Business Line : `Growth story for paints is here'— Booming economy drives domestic market to the fore

An 8 per cent GDP growth has a cascading effect on all sectors of the economy, including prime consumers of paints such as the housing and industrial sectors and the automobile industry.

Mumbai , Dec. 4

INDIA's GDP growth of 8 per cent during the July-September 2005 quarter has made the country an important market for the paints industry.

"The growth story for paints is in India. We do not need to look anywhere else,'' the top official of a paint manufacturer who did not wish to be named, said.

While his company had production facilities in several countries and a growing international business, the booming domestic economy had clearly thrust home market to the fore.

Strictly in terms of growth rate, West Asia ruled the roost on his market portfolio. But in India, you have a major economy and a market that is the second most populous globally. Simply put, it cannot be overlooked now.

Cascading effect: An 8 per cent GDP growth has a cascading effect on all sectors of the economy, including prime consumers of paints such as the housing and industrial sectors and the automobile industry.

According to Mr Ashwin Dani, Vice-Chairman and Managing Director, Asian Paints Ltd, the industry is expected to grow by 15 per cent in value terms in the current fiscal.

India, a predominantly decorative paints market, had been seeing a big growth in the industrial paints segment propelled in part by the surge in automobile buying. The automobile segment accounts for 50 per cent of the demand for industrial paints.

Though the automobile segment has betrayed signs of cooling down during the current financial year, demand for other industrial paints is surging, paint company officials said. "Consumer buying of various goods is going up. Therefore, demand for various industrial paints is also going up. Be it floor coatings for the pharmaceutical or foods industry, road marking paints, high performance coatings for the petrochemical and other related sectors, powder coating for doors — offtake of all these paints are on an upward move," the official said.

Input costs benign: Further, this spurt in demand is happening alongside a continued benign trend in raw material costs for the paint industry. These input costs had moved up sharply some time ago, but for the last three to four months they have held back.

The situation is amply illustrated by the modest 0.5 per cent price hike, which the biggest domestic player, Asian Paints, effected in select product categories.

On a medium term trajectory too, the official said input costs should hold steady. Per capita consumption of paint is low in India and though the economy is growing fast, its overall size is still far from skewing input costs like China did.

"Raw material costs should continue to be benign for some time at least," he said.

Sales volumes high: Paint companies have been able to negate the impact of input costs, if any, through higher volume sales, said Mr Ashok Saini, Vice-President — Special Projects, Goodlass Nerolac Paints Ltd.

"So far demand has been good in this financial year and we expect the company to perform well for the entire year. Demand has been good in both decorative and the industrial coatings segment.

"However, inflation is still a cause of concern due to volatility in oil prices," Mr Dani said.

Asian Paints, the biggest domestic player, expects industrial coatings business to grow by at least 20 per cent in value terms.

At present, the industrial coatings business accounts for 15 per cent of the company's revenue share while decorative paints accounts for 85 per cent.

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